The Democrat Thread

[Balta1701]

PERSONAL FINANCE is the basic skill of survival. Not really sure how you can dispute that in today's world.

But that is fundamentally different from being able to establish a long term retirement plan.

[Jenksismyhero]

the only reason people don't have large retirement accounts is lack of education and responsibility?

 

Absolutely. The people we're talking about here don't understand money and finances. They spend too much. They buy s*** they can't afford. They over extend themselves. They're the idiots that think buying a 250k home with a 5 year arm is a good decision because they can pay for it right now. Or a lower monthly payment on a car but for a longer term with high interest is the right decision.

 

And they make those mistakes for 60 years.

 

Hell, the most basic one of all is that education = more money.

[Jenksismyhero]

But that is fundamentally different from being able to establish a long term retirement plan.

 

No, it's not. Good personal finance habits through your life provides you with late-life retirement benefits like having some savings and not having anything to pay for.

Edited February 6, 2013 by Jenksismybitch

[StrangeSox]

The main reason I utilize a 401k account is because my company matches up to 6% of my base salary that I put into it. If I was super paranoid, there is nothing saying I couldn't put the money straight into the bank, or invest it in any number of very safe investments. And yes, I could absolutely hire someone to do this for me, if I was not savvy enough to figure that out myself.

 

You guys are going to jump all over the recent banking and market scandals, but let's face it, if I was REALLY conservative, I could take my money into any bank or investment firm, and say "tell me how to invest this money along the ultra-conservative risk spectrum," and they would guide me towards those options. One doesn't have to buy stocks or mutual funds with their savings. And that doesn't require anyone to have any more common sense than it requires of someone to balance a monthly budget or determine how much house they can afford.

 

You make a pretty good salary and can afford to set aside a decent chunk of money. The average household making $50k can't do that.

 

So now you're paying money to someone to manage your accounts. What if they get it wrong? Why is it better to be having them siphon money from your investments instead of a better guaranteed retirement fund?

 

The reason many middle class workers are not prepared for retirement is because they do not have the discipline to properly save their money. Not because doing so is so incredibly complex that they don't have the requisite knowledge to do so.

 

Saving alone won't cut it, you need growth. Growth entails risk, and even "safe" investments can go bad.

 

Yes, I'm going to jump all over the recent (and continuing) economic collapse that came directly from the financial investment sector. And the one before that (tech bubble), and the S&L scandal and numerous other financial setbacks we've had.

[Balta1701]

Absolutely. The people we're talking about here don't understand money and finances. They spend too much. They buy s*** they can't afford. They over extend themselves. They're the idiots that think buying a 250k home with a 5 year arm is a good decision because they can pay for it right now. Or a lower monthly payment on a car but for a longer term with high interest is the right decision.

 

And they make those mistakes for 60 years.

 

Hell, the most basic one of all is that education = more money.

The mortgage one is a great example, because that $250k ARM would have been sliced up and sent off to half a dozen different wall street firms, loaded with financial professionals, each of whom bought into the same crap about how housing prices were going to permanently skyrocket.

 

Yet...they had an ace in the hole...a bailout.

[Balta1701]

No, it's not. Good personal finance habits through your life provides you with late-life retirement benefits.

If I had irresponsible personal finance habits, I could have had another $100k in the bank right now. I considered buying property as a grad student on one of those liar loans, and I didn't do so because I thought that it would be impossible to predict the time the bubble was going to burst. 2006 rolled around, people started giving away priuses to keep housing prices looking good, and the peak of the bubble turned out to be so much more obvious than I'd ever have imagined.

[StrangeSox]

PERSONAL FINANCE is the basic skill of survival. Not really sure how you can dispute that in today's world.

PERSONAL FINANCE is a relatively recent "skill of survival" for humans and isn't relevant to many people still today (subsistence living in much of the developing world). It's not some innate skill that humans have.

 

Financial investment is even newer and less widespread of a "basic skill of survival." And we go right back to asking "why should this be a 'basic skill of survival'?"

[StrangeSox]

Absolutely. The people we're talking about here don't understand money and finances. They spend too much. They buy s*** they can't afford. They over extend themselves. They're the idiots that think buying a 250k home with a 5 year arm is a good decision because they can pay for it right now. Or a lower monthly payment on a car but for a longer term with high interest is the right decision.

 

And they make those mistakes for 60 years.

 

Can you give me some citations and data for this? Or is this just your "gut feel" of personal finances in this country?

 

Are people over-extending themselves because wages have stagnated for decades (where is this money going? finance sector!) but COL rises? What would happen to our consumer-driven economy if people drastically started cutting back on demand?

 

Hell, the most basic one of all is that education = more money.

 

For a while, an investment in a college degree was a good investment and great planning. Especially something like a law degree. Today, and especially since the last 4-5 years? You could be coming out of school with a mortgage-sized debt and no job to show for it and few prospects if any.

[StrangeSox]

If 99% of people don't do it in the first place, why is it a problem? If SS has been the main retirement plan, why isn't the current level sufficient? I'm not seeing old people dying left and right because their SS checks aren't big enough.

 

It wasn't the main retirement plan. We've had a couple of generations with pensions. Before that, in the gilded age, things were pretty damn ugly for a lot of people. Going back father to pre-industrial eras doesn't provide many meaningful comparisons imo.

[Balta1701]

For a while, an investment in a college degree was a good investment and great planning. Especially something like a law degree. Today, and especially since the last 4-5 years? You could be coming out of school with a mortgage-sized debt and no job to show for it and few prospects if any.

Obviously not every degree is the same, but there's still a very large premium associated with extra education, in terms of both the availability of employment and wages. It's shrunk as college costs have screamed up, but it's still quite big.

[StrangeSox]

Obviously not every degree is the same, but there's still a very large premium associated with extra education, in terms of both the availability of employment and wages. It's shrunk as college costs have screamed up, but it's still quite big.

 

That's not true for a lot of the middle- and lower-tier law schools these days. Of course, they've actively lied to students about graduation employment rates, but the courts said that students should have been able to figure out that they were lying on their own and that they're not liable for the misrepresentation.

 

edit: for a stark example, entering some middle-tier law school in 2006 would have been a great, responsible decision to take on tens of thousands of dollars in debt in exchange for a future career in law. Now when that person graduates in 2009, they're not going to be able to find s***. Probably still can't 3-4 years later. But they've still got huge debt obligations hovering over them.

 

 

Edited February 6, 2013 by StrangeSox

[Balta1701]

That's not true for a lot of the lower-tier law schools these days. Of course, they've actively lied to students about graduation employment rates, but the courts said that students should have been able to figure out that they were lying on their own and that they're not liable for the misrepresentation.

Like I said, not true for every place. I should add as well that the for-profit schools are effectively a government subsidized scam, that holds down the overall numbers as well.

[Jenksismyhero]

The mortgage one is a great example, because that $250k ARM would have been sliced up and sent off to half a dozen different wall street firms, loaded with financial professionals, each of whom bought into the same crap about how housing prices were going to permanently skyrocket.

 

Yet...they had an ace in the hole...a bailout.

 

Hey don't look at me, I was against all of the bailouts.

[StrangeSox]

The collapse of the world's banking systems would have done wonders for IRA's and 401(k)'s.

 

(I'm still torn on that one given how the people who caused this mess got to keep and increase their personal fortunes and are apparently immune from criminal prosecution now)

[Jenksismyhero]

PERSONAL FINANCE is a relatively recent "skill of survival" for humans and isn't relevant to many people still today (subsistence living in much of the developing world). It's not some innate skill that humans have.

 

Financial investment is even newer and less widespread of a "basic skill of survival." And we go right back to asking "why should this be a 'basic skill of survival'?"

 

It's a learned skill that's a basic need. A hunger/gatherer 10000 years ago wasn't born with the skill, he had to learn it. The same thing with personal finance today. Financial investment is not "basic" skill, but it's still readily available to the vast majority of people. You can invest without being all that risky, especially when spread out over your lifetime.

 

This basically just comes down to your typical argument - some people have a lot, other people don't have as much. It's not fair.

[Jenksismyhero]

The collapse of the world's banking systems would have done wonders for IRA's and 401(k)'s.

 

(I'm still torn on that one given how the people who caused this mess got to keep and increase their personal fortunes and are apparently immune from criminal prosecution now)

 

No, the government could have insured those losses instead of just paying the companies off. I was fine doing that in some situations. But again, the vast majority of those investors that lost money in the collapse really only lose 2-3 years of growth. That's why you can't look at these things in 10 year chunks. It's a lifetime of investment and there's really no reason not to come out ahead.

[illinilaw08]

http://www.dailyfinance.com/2012/10/15/17-...nt-savings-in-/

 

Relevant to the discussion going on. There's clearly a problem brewing. Both my grandfathers worked in the private sector. Both had pensions that enabled them to retire early. My parents were teachers. They have pensions that have enabled them to retire early. Pensions don't really exist in the private sector any more (that I am aware of anyway), so people need to invest in the market. But no one is forcing them to invest. They weren't educated in finance, and they aren't thinking about 30 years down the road.

 

I don't know what the solution to this problem is, but the stats above show that this hits a LOT of people and it could become a big problem sooner rather than later.

[Balta1701]

No, the government could have insured those losses instead of just paying the companies off. I was fine doing that in some situations. But again, the vast majority of those investors that lost money in the collapse really only lose 2-3 years of growth. That's why you can't look at these things in 10 year chunks. It's a lifetime of investment and there's really no reason not to come out ahead.

Of course, the basic underlying point is...Wall Street, people who are paid millions of dollars to make solid financial decisions...on the whole understood less about the mortgage market than a random geology grad student in california. I didn't have all the details down about how Credit Default Swaps nearly destroyed the world, but I pretty much nailed where things were going before 2004.

 

Even expert financial types can't make decisions that can be counted on, yet you're willing to declare that's a basic skill on which people's long-term livelihoods should be almost entirely based. You're willing to criticize someone who takes out a mortgage they can't pay off...but the most knowledgeable financial professionals in the world were happy to make that loan and buy it up like it was going out of style.

[Jenksismyhero]

Can you give me some citations and data for this? Or is this just your "gut feel" of personal finances in this country?

 

Are people over-extending themselves because wages have stagnated for decades (where is this money going? finance sector!) but COL rises? What would happen to our consumer-driven economy if people drastically started cutting back on demand?

 

I think it's common sense, but I don't have time (or the desire really) to look for some study about it. Just look at black friday shopping. Millions of people thinking they're getting a deal on a bunch of crap merchandise that just a month prior got slowly jacked up in price so that the "deals" were not really "deals."

 

For a while, an investment in a college degree was a good investment and great planning. Especially something like a law degree. Today, and especially since the last 4-5 years? You could be coming out of school with a mortgage-sized debt and no job to show for it and few prospects if any.

 

True, but I think you could make the argument that if you're one of those students the last 2-3 years you made a terrible mistake despite knowing exactly what you were getting yourself into. Law schools are subprime lenders. You should know what you're signing up for. It's not something totally fraudulent, it's just making a terrible decision.

 

[Jenksismyhero]

Of course, the basic underlying point is...Wall Street, people who are paid millions of dollars to make solid financial decisions...on the whole understood less about the mortgage market than a random geology grad student in california. I didn't have all the details down about how Credit Default Swaps nearly destroyed the world, but I pretty much nailed where things were going before 2004.

 

Even expert financial types can't make decisions that can be counted on, yet you're willing to declare that's a basic skill on which people's long-term livelihoods should be almost entirely based. You're willing to criticize someone who takes out a mortgage they can't pay off...but the most knowledgeable financial professionals in the world were happy to make that loan and buy it up like it was going out of style.

 

Because at the end of the day we have market collapses but the market continues to grow and expand. Look at the market indexes over the last 60 years. It goes up, even with the dips here and there.

 

And I don't think make-em-up investments = subprime mortgages. One is idiotic on its face, the other is just an unknown.

 

[Balta1701]

Because at the end of the day we have market collapses but the market continues to grow and expand. Look at the market indexes over the last 60 years. It goes up, even with the dips here and there.

 

And I don't think make-em-up investments = subprime mortgages. One is idiotic on its face, the other is just an unknown.

Yes it does...but it does not expand at such a rate to substantially outpace inflation + management fees unless you get very lucky with your investments.

[Jenksismyhero]

From that article, exactly what i'm talking about:

 

30% of workers in a 2012 study reported that they had less than $1,000 in savings and investments. (Source: Employee Benefit Research Institute)

 

Nearly 75% of retirees have not saved enough and said they would save more if they could do it all over again. (Source: Health and Retirement Study)

 

21% of workers covered by 401(k) plans choose not to participate. (Source: Center for Retirement Research)

 

56% of workers report that they have not attempted to calculate how much money they will need to have saved for a comfortable retirement. (Source: Employee Benefit Research Institute)

 

You don't think this stuff - lack of good personal finance skills and ability to think long term - feeds into the other problems listed in that article?

[StrangeSox]

It's a learned skill that's a basic need. A hunger/gatherer 10000 years ago wasn't born with the skill, he had to learn it.

 

There were thousands of generations of evolution to develop abilities to hunt and gather, though. That doesn't apply to financial investing, with it's incredibly complex and numeric-centric nature and the need to assess risk and results years and decades into the future. That's not something humans are particularly well adapted to naturally.

 

The same thing with personal finance today. Financial investment is not "basic" skill, but it's still readily available to the vast majority of people. You can invest without being all that risky, especially when spread out over your lifetime.

 

I don't see any evidence that long-term successful financial investment is a skill that's readily available to a bare majority of the people or even a substantial minority. We've been doing this for about one generation now, and it's turning out very poorly. Well, not for wall street, but for most others.

 

This basically just comes down to your typical argument - some people have a lot, other people don't have as much. It's not fair.

 

No, it doesn't come down to that. It comes down to "there's no good reason to make everyone's retirement hinge on their ability to succeed at financial investing, especially since it's a new phenomenon and early results aren't very promising."

[StrangeSox]

I think it's common sense, but I don't have time (or the desire really) to look for some study about it.

 

I'm not going to trust 'common sense' that just happens to support the conclusions you've already come to.

[StrangeSox]

True, but I think you could make the argument that if you're one of those students the last 2-3 years you made a terrible mistake despite knowing exactly what you were getting yourself into. Law schools are subprime lenders. You should know what you're signing up for. It's not something totally fraudulent, it's just making a terrible decision.

 

Except they were deliberately misleading in their representation of graduate employment rates. And it's been something that's been culturally reinforced for generations as a good idea and still widely is.